Mortgage rates appear to have fared unexpectedly well for the previous year. Reflecting back on 2019, it’s clear that last year’s mortgage market was the best since the height of the pre-crisis boom.
“Lenders extended $2.4 trillion in home loans last year, the most since 2006, according to industry research group Inside Mortgage Finance,” wrote realtor.com’s Orla McCaffrey in a January 24 article. “That was also a 46% increase from 2018.”
Generally speaking, higher levels of mortgage lending is regarded as a sign of a healthy housing market. In the U.S., a rebound in price growth and a boost in home sales helped strengthen the market after a period of decline.
“A refinancing frenzy, induced by last year’s trio of interest-rate cuts, fueled the mortgage making and helped steady the industry,” wrote McCaffrey. “The refinancing boom also bodes well for the broader economy, since homeowners saving on their monthly mortgage payments are likely to spend more on goods and services.”
She goes on to quote Freddie Mac’s chief economist Sam Khater, who says when a large and cyclical part of the economy—housing—is starting to improve, it’s a good sign for the economy at large. Also cited is the Mortgage Bankers Association, which estimates that refinances made up 38% of mortgage originations last year.
The average rate on the 30-year fixed-rate mortgage, one of the most popular home loans in the U.S., dropped considerably by the end of 2019, and the average rate is now its lowest level in more than three months. December sales of existing homes jumped nearly 11% from the year before, according to the National Association of Realtors. While the uptick in mortgage lending is a boon, it does not mean it will be easy to buy a home this spring, according to McCaffrey.
“Major barriers including a lack of housing supply and relatively tight bank-lending standards are pushing homeownership out of reach for many Americans.”
The price of homes continues to rise faster than incomes, meaning affordability could remain an issue. Still, there is an expectation that interest rates will hold steady or even keep falling — a good sign for mortgage lending in 2020, analysts say.